How to Handle Change Orders Like a Pro — Without Losing Profit

Admin Renovation Room
Mar 19
4 min read

Key Highlights

Understand what change orders are and why they happen
Implement proactive strategies to minimize unnecessary changes
Learn how to price change orders accurately and profitably
Establish strong documentation practices to avoid disputes
Communicate effectively with clients to ensure transparency
Discover how technology can streamline your change order process

Introduction

Change orders are an inevitable part of any construction project. Whether it's an unexpected site condition, a client’s design modification, or a regulatory change, contractors frequently face the challenge of adjusting plans mid-project. However, mishandling change orders can lead to disputes, delays, and, worst of all — lost profits. For contractors striving to stay competitive and profitable, mastering the change order process is essential.

This blog will guide you through handling change orders like a pro — from understanding their nature to implementing effective strategies for management, documentation, and client communication. By the end, you’ll know how to turn change orders from profit killers into opportunities to strengthen your reputation and bottom line.

Understanding Change Orders

A change order is a formal amendment to the original construction contract, detailing modifications to the scope of work, pricing, or project timeline. These changes can stem from various factors, including:

Client requests for upgrades or design changes
Unforeseen site conditions (e.g., hidden structural issues)
Errors or omissions in the original plans
Regulatory changes or permit revisions
Material availability or substitutions

Why Do Change Orders Matter?

Change orders significantly impact project costs, schedules, and resource allocations. Poorly managed change orders can lead to:

Budget overruns
Project delays
Strained client relationships
Legal disputes
Profit erosion

Understanding why change orders occur and their potential consequences is the first step in managing them effectively.

Proactive Planning to Minimize Change Orders

While you can’t eliminate all change orders, you can certainly reduce their frequency with proactive planning. Here’s how:

Detailed Preconstruction Planning: Involve key stakeholders early to ensure everyone agrees on the project scope, budget, and timeline.
Thorough Site Assessments: Conduct comprehensive inspections to identify hidden risks before breaking ground.
Clear Contracts: Draft contracts that define the scope of work, materials, pricing, and procedures for handling change orders.
Realistic Scheduling: Build flexibility into your timeline to accommodate minor changes without causing major delays.
Set Client Expectations: Educate clients on how change orders affect timelines and costs to minimize last-minute alterations.

Pricing Change Orders for Profit

Many contractors lose money on change orders because they underprice the work or overlook indirect costs. To ensure profitability:

Accurately Estimate Costs: Account for labor, materials, equipment, and subcontractors.
Include Overhead and Profit Margins: Don’t forget administrative costs, permits, insurance, and a healthy profit margin.
Factor in Delay Costs: If the change order extends the project timeline, calculate the added costs of labor and equipment downtime.
Use a Consistent Pricing Model: Develop a standardized pricing structure for change orders to avoid undercharging.

Pro Tip: Present change order costs as a detailed breakdown to build client trust and reduce pushback.

Documenting Change Orders Properly

A verbal agreement might seem convenient, but it’s a recipe for disputes. Solid documentation is your best defense. Every change order should include:

A clear description of the work to be changed
Updated drawings or specifications
Revised costs and timeline adjustments
Signatures from all parties

Leverage Digital Tools: Construction management software can streamline documentation, track approvals, and ensure nothing gets overlooked.

Communicating Changes to Clients

Effective communication is key to handling change orders smoothly. Here’s how to keep clients informed and satisfied:

Explain the Reason for the Change: Clients are more likely to approve change orders if they understand why they’re necessary.
Be Upfront About Costs and Delays: Hiding bad news leads to bigger problems. Be honest and provide alternatives where possible.
Keep Clients Updated: Regular progress reports prevent misunderstandings and keep everyone on the same page.
Stay Professional: Even if the client caused the change, handle the conversation calmly and constructively.

Streamlining Change Orders with Technology

Manual paperwork and back-and-forth emails make change orders more painful than they need to be. Technology can simplify the process. Consider these tools:

Construction Management Software: Platforms like Procore, Buildertrend, or CoConstruct allow you to track changes, costs, and approvals in real time.
Digital Estimating Tools: Speed up pricing with apps that generate cost breakdowns instantly.
Mobile Field Apps: Let teams update change orders from the job site to minimize delays.

Investing in the right technology improves accuracy, efficiency, and client satisfaction — ultimately protecting your profits.

Join The Renovation Room Community

Handling change orders — and running a profitable contracting business — is easier when you’re part of a supportive, knowledgeable community.

The Renovation Room website and Facebook Group are designed specifically for contractors like you. With over 36,000 members, it’s a hub for sharing strategies, getting advice, and staying up to date on industry best practices.

Get real-world insights from experienced contractors
Discuss pricing, project management, and client relations
Stay motivated and connected with like-minded professionals

Join today and discover how being part of a thriving contractor community can help you handle change orders — and your entire business — more effectively.

Conclusion

Change orders are unavoidable, but they don’t have to be unmanageable. By understanding why they happen, planning proactively, pricing accurately, documenting thoroughly, communicating openly, and embracing technology, you can handle change orders like a seasoned pro — without sacrificing profits or client relationships.

Mastering change orders isn’t just about preventing losses; it’s an opportunity to demonstrate professionalism, build trust, and differentiate your business from competitors. Contractors who handle change orders smoothly are more likely to earn repeat business and referrals.

Frequently Asked Questions (FAQs)

1. How do you avoid disputes over change orders?

Clear contracts, thorough documentation, and open communication are key to avoiding disputes.

2. Can you charge for a verbal change order?

It’s risky. Always get change orders in writing to ensure you’re legally protected and paid for the extra work.

3. What’s the biggest mistake contractors make with change orders?

The most common mistakes are underpricing, poor documentation, and failing to communicate with the client.

4. Should you charge a fee for processing change orders?

Yes! Change orders create additional admin work. Including a small processing fee is reasonable and helps cover overhead.

5. How can small contractors compete with larger companies on change order management?

Embrace technology to stay organized, improve response times, and present professional, transparent pricing — clients will notice the difference.